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Property Herald - Potential Start Of New HDB Resale Price Boom Nipped In The Bud

How have the recent cooling measures affected the HDB resale market? Join Nicholas Mak as he dives into the latest statistics to discover and predict upcoming trends for 2023.


Introduction: The HDB resale market in 1Q 2023

The overall HDB resale housing prices increased 1.0% quarter-on-quarter (qoq) in the first quarter of 2023 (1Q 2023), slower than the 2.3% qoq price growth in the preceding quarter of 4Q 2022.

The slower growth of public housing prices in the first quarter of the year is seasonal, occuring every year for the past 16 years since 1Q 2007. In 1Q 2007, the HDB resale price index increased at a faster pace, partly due to the start of the bull market at that point in time.


HDB resale transaction volume in 1Q 2023

In the first quarter of this year, 6,979 HDB resale flats exchanged hands, 5.8% more than the resale transaction volume in the preceding quarter. This is the first time in 14 years that the transaction volume of HDB resale flats in the first quarter of the year exceeded the resale volume of the last quarter of the preceding year.

The previous time that this happened was in 1Q 2009. It signalled the start of the growth cycle of HDB resale prices that lasted about four years, from 2009 to 2013.

The government is closely watching the public housing market and will nip any potential bull market in the bud with various policies and measures. The cooling measures implemented in September 2022 is one such example. The market curbs contributed to the slowdown in the price growth of HDB resale flats that started in 4Q 2022.


Effects of the latest cooling measures on the HDB resale market

Compared to other property market segments, the HDB resale market will be the least affected by the latest property curbs. But the combined weight of all the other cooling measures will still be felt in the public housing market in a few ways:

(1) In the next few months, the immediate impact is that the transaction volume of private properties and HDB resale flats properties would fall as buyers and sellers take stock of the new market environment that would be shaped by the latest round of property curbs.


Some HDB upgraders could temporarily delay their upgrading plans, leading to a lower resale volume of HDB flats for a few months.

We could see upgraders opting for larger, more premium HDBs rather than private property in the future.

(2) Some HDB upgraders may shelf their plans to upgrade to a private property due to financial difficulties coming up with the hundreds of thousands of dollars needed to pay the ABSD - even if they could apply to the government for a refund later.

(3) Some HDB upgraders may decide to upgrade to bigger or better-located HDB flats instead of private properties. In the medium term, this could lead to a rise in demand for bigger or better-located HDB flats, sustaining the transaction volume of million-dollar HDB resale flats.

(4) Property developers could build even smaller residential units in order to keep the price quantum “affordable”. Property developers are always looking for ways to increase the property price in terms of dollar per square foot ($psf) without turning off the buyers. The most common method is to reduce the size of the housing unit.

We could see the emergence of more 1-2 room condos to keep private property prices acceptable to buyers after the latest curbs.

If the developers keep the size of the housing unit unchanged and raise the property price quantum, the higher ABSD rate would reduce buying demand. Therefore, in the near future, the family-size housing units in the new condominium projects would be even smaller than those today.

If the sizes of new private housing units are reduced, the sizes of new HDB flats could also become smaller, based on trends observed in past years.


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